Exposing the misuse and abuse of the public commons

Texans for Public Justice is proud to release the first installment of its new series investigating abuses and misuses of public assets for private gain. Each month “Watch Your Assets” will expose ways in which private interests benefit from resources that should be protected for the public good. The first issue, “’Til Your Well Runs Dry,” reports that at a time when Texas’ water supply is stretched to the breaking point, the state has converted Central Texas’ Edwards Aquifer into a multi-million dollar commodity that is being auctioned off for private gain. We hope you enjoy the report. Don’t forget to visit the site to “watch your assets” in the months to come. Please send feedback as we develop this new project. —Lauren Reinlie, Project Director

April 26, 2007

‘Til Your Well Runs Dry:

How the State of Texas Converted the Edwards Aquifer into a Multi-Million Dollar Commodity

Responding
to a federal lawsuit, the state of Texas created an agency in 1993 to
regulate water withdrawals from the Edwards Aquifer. Running in a
160-mile arc from Austin through San Antonio and west to Kinney County,
this underground lake feeds the Guadalupe River and the San Marcos and
Comal springs. It sustains the lives of millions of Central Texans –
and sundry other life forms. Under the so-called “rule of capture,”
landowners previously could take as much water as the aquifer yielded,
even if this consumption sucked their neighbor’s well, springs or river
dry.

The state empowered the Edwards Aquifer
Authority to establish a permitting system that limits aquifer pumping
in order to protect spring flows, as ordered by a federal judge. The
agency awarded permits based on historical use established under the
rule of capture. It awarded most of the rights to wealthy landowners,
such as former Governor Dolph Briscoe, and major utility companies led
by the San Antonio Water System. The creation of the EAA marks the
state’s first formal recognition of the aquifer as a resource to be
protected for the public good. At the same time, the state used the EAA
as a vehicle to convert Edwards water into what is fast becoming a
lucrative water market. As a result, a handful of private interests
stand to make a great deal of money off this resource.

A
relatively small number of local governmental entities, private
entities and individuals now own the permits for all available aquifer
water and no new permits will be issued. These owners can lease or sell
this commodity – potentially worth hundreds of millions of dollars – on
the open market.

Texas’ population is expected
to double by 2060; Central Texas is one of the state’s fastest-growing
regions. As the area’s urban population mushrooms, big utility
companies that control more than half of EAA-permitted water have
reached the limits of their permits. To meet additional water needs,
cities are looking to the farmers, ranchers and big landowners who
control the next-largest chunk of EAA permits but harvest only about a
quarter of their allotment. Water brokers are buying up rights from
these owners to sell or lease to the most lucrative urban markets.

Under
these market pressures the price of aquifer water will almost certainly
continue to skyrocket – even if the aquifer supply stays constant. A
recent Columbia University analysis of global-warming patterns predicts
that Texas will enter a period of permanent drought within the next 15
years. Given the continuing demands of urban growth and the rising
potential for water fortunes to be made, Edwards Aquifer politics are
fixing to become a pressure cooker.

The
15-member publicly elected Edwards Aquifer Authority board is charged
with the potentially conflicting goals of preserving the aquifer for
the public good and protecting the interests of those who own the
rights to the aquifer’s waters. No one can agree on the amount of water
that can be pumped while sustaining the aquifer’s integrity. According
to a recent study published by the Texas Water Development Board, under
current pumping conditions a major drought could dry up Comal springs
for at least two years. As the market value of Edwards rights
escalates, people who control these rights will pressure the EAA to
keep the pumps running.

Many of the aquifer’s
largest permit holders are major players in state politics and also
exert influence in the much smaller pond of EAA politics. If growing
marketplace pressures continue to convert aquifer water to gold, as
expected, the EAA runs a risk of being captured by the high-dollar
interests that it is charged with regulating. As currently organized,
the EAA does not appear to have the transparency and protections needed
to safeguard the public interest in the aquifer against the narrow
interests who own the rights to what is fast becoming a commodity worth
hundreds of millions of dollars.

The Permit Holders

The
Edwards Aquifer’s total value vastly exceeds the market value that it
represents to private pumpers, says Ken Kramer, director of the Lone
Star chapter of the Sierra Club. “The value comes from the discharge in
the springs and the value of the downstream flows,” says Kramer, whose
organization was a plaintiff in the lawsuit that prompted the
Legislature to create the EAA.
If the aquifer were runs dry, the springs will dry up, rivers will lose
their flow and the public would lose access to this crucial water
system.

To
protect this ecosystem, the law creating the Edwards Aquifer Authority
capped total water permits at 450,000 acre-feet of water per year and
stipulated that this cap be cut to 400,000 acre-feet by 2008. (An
acre-foot, or 325,000 gallons, covers an acre of land with a foot of
water.) Yet the same law directed the agency to award permits based on
historical usages established under the rule of capture from 1973 to
1992. As a result, the EAA overshot its prescribed cap. It currently
has 546,211 acre-feet permitted. Both the agency and many of its top
permit holders are backing legislation to raise the cap to 549,000
acre-feet.1 They are
seeking this increase despite the fact that permit holders pumped just
325,043 acre-feet in 2005 (the most recent year for which the agency
has provided complete withdrawal data).

EAA Water Permits By Interest (in acre-feet)

Interest Category

2007
Permitted

% of All
Permits

2005
Permitted

2005
Pumpedı

% Used
in 2005

Local Governments

294,543

53.9%

308,002

243,022

79%

Individuals

175,278

32.1%

180,860

47,066

26%

Concrete/Aggregates

13,707

2.5%

15,935

8,129

51%

Agriculture²

12,221

2.2%

16,287

3,640

22%

Water Brokers

8,316

1.5%

5,636

99

2%

Development³

7,593

1.4%

7,834

2,285

29%

Construction

6,426

1.2%

7,382

3,474

47%

Water Companies

4,622

0.8%

4,408

6,197

141%

Nursery/Landscaping

2,573

0.5%

4,556

2,098

46%

Schools

2,552

0.5%

2,924

1,332

46%

Golf

2,117

0.4%

2,282

985

43%

Miscellaneous Business

6,533

1.2%

7,274

3,159

43%

Unknown

9,731

1.8%

10,646

3,545

33%

TOTALS:

546,211

100.0%

574,027*

325,031

57%

¹ 2005 is the most recent year for which the EAA provided complete pumping data.
² Includes farms and ranches that could not be directly tied to an individual or family.
³ Includes special utility districts created for new developments.
* An additional 3,547 acre-feet were permitted in 2005. This table just
lists 2005 permit data for those owners who continued to hold rights in
2007.

In
2005, permit holders pumped 56 percent of permitted withdrawals. Some
of this may be attributed to the EAA’s power to restrict pumping during
“critical management periods” that endanger the aquifer’s ability to
recharge itself.

The EAA tracks permits in the name of the
user who is renting a water right rather than the ultimate owner. So
the permit numbers reported here can be misleading. Some of the water
rights attributed to permit holders could be leased rather than owned.
Conversely, these numbers underreport the total water rights of permit
holders who have leased out water to others.

Local
governmental entities hold permits for 54 percent of the aquifer’s
total permitted water, which they sell to millions of customers. These
governmental bodies, which are scrambling to accommodate rapid growth,
pumped out 79 percent of their permitted aquifer water in 2005.

Individual
landowners and other predominantly agricultural interests are the
next-largest category of permit holders, accounting for 34 percent of
all permitted water.2
Most of these permits are specially designated “irrigation permits.”
Generally, half of the water covered by an irrigation permit is tied to
the agricultural land in question, while the other half can be sold or
leased for other uses.

Many irrigation permit holders either
never did much irrigation, abandoned the practice altogether or have
curtailed their water use through conservation. As a result,
these landowners have a water surplus and pumped only 25 percent of
their permitted allotment in 2005. Fast-growth urban areas regard these
water-rich landowners as a possible solution to their future water
needs. They are rapidly bidding up water prices.

EAA permits
now sell for between $5,500 and $6,000 an acre-foot, up 34 percent from
their $1,850 selling price just four years ago.2
The same acre-foot of Edwards water leases for $125 a year, says EAA
Vice-Chair Luana Buckner, who heads the agency’s Permits Committee. “It
was very much the intent of this [EAA enabling] legislation to create
this market,” Buckner says. “You can’t transfer the water outside out
of the boundaries of the authority. The whole process is [designed] to
facilitate that market.”

Responding to this explosive market,
water-brokering companies are stockpiling EAA permits to sell or lease
to other users. Water brokers only pumped 2 percent of their allotted
amount in 2005. While these broker companies now control only about 1.5
percent of all EAA-permitted water, they increased the volume of their
water rights a remarkable 48 percent over the last two years.3 Current broker permits have a market value of more than $45 million.

Private
water companies, which account for less than 1 percent of EAA-permitted
water, were the only interest category that pumped more water than they
were entitled to in 2005. Aqua Texas, a subsidiary of Aqua America, the
nation’s largest publicly traded water company, is responsible for most
of the over-pumping. With hundreds of local water systems statewide,
Aqua Texas pumped 3,349 acre-feet in 2005 despite holding permits for
just 3 percent of this amount. The company tried to cover their pumping
by leasing extra rights and reached a settlement with EAA. Private
water companies and water brokers (discussed later) were the only
interest categories that actually increased the volume of their EAA
permits from 2005 to 2007, a period in which the EAA cut the total
amount of water permitted by 5 percent.

The concrete
industry, which has 2.5 percent of EAA-permitted water, pumped 51
percent of its allotment in 2005. Permit holders Vulcan Construction
Materials and Martin Marietta Materials are the nation’s top producers
of gravel aggregates used in concrete. Mexico-based CEMEX, another
permit holder, operates a New Braunfels cement plant that represents
the largest investment ever made in Comal County. 4

Top 25 Edwards Aquifer Permit Holders

(Representing 61% of All Permitted Acre-feet)

Permit Holder

2007 Permits

2005 Permits

2005 Pumped

% Used

San Antonio Water System

215,894

226,416

190,392

84%

Bexar Metropolitan Water District

33,026

30,551

24,819

81%

Briscoe Ranch, Inc.

15,130

16,741

5,173

31%

New Braunfels Utilities

6,568

5,970

3,255

55%

City of Uvalde

5,498

5,318

3,752

71%

Martin Marietta Materials Southwest, Ltd.

4,451

5,166

3,004

58%

CEMEX Cement of Texas, L.P.

4,021

5,307

3,646

69%

Roger & Marvin Verstuyft

3,482

3,482

1,438

41%

City of Hondo

3,413

3,488

1,880

54%

Laguna Water II, Ltd.

3,119

2,917

0

0%

Woodley Water, Ltd.

3,100

1,920

0

0%

Petty Ranch Company

3,008

3,050

1,423

47%

Vulcan Construction Materials, LP

3,005

3,260

1,833

56%

City of Universal City

2,867

3,706

2,544

69%

Alamo Concrete Products, Ltd.

2,827

2,932

1,025

35%

City of San Antonio - ZOO

2,750

2,750

2,582

94%

U-Bar Ranch, Inc. (H.B. Zachry)

2,570

2,570

375

15%

Flying W Properties, Ltd. (construction)

2,567

3,411

1,619

47%

R.B. Willoughby, Jr. and Cecil R. Atkission, Jr.

2,524

4,924

771

16%

City of San Antonio – City Public Service Energy

2,399

3,064

520

17%

Lewis R. Cole, Jr. and Kenneth S. Cole

2,388

2,388

963

40%

Box K, Limited

2,307

2,307

214

9%

Blackstone and Frances Dilworth

2,304

2,304

1,472

64%

John R. and Vivian W. Windrow

2,239

2,374

66

3%

City of San Marcos

2,222

5,425

1,684

31%

San Antonio's Demands

The
nation’s seventh-largest city historically has been utterly dependent
on the Edwards Aquifer to satiate its ever-expanding thirst. The San
Antonio Water System (SAWS), a municipally controlled utility with one
million customers in Bexar County, extracts 93 percent of its water
from the aquifer. SAWS has title to 40 percent of the aquifer’s pumping
rights. The No. 2 EAA permitee, the Bexar Metropolitan Water District,
controls another 6 percent of the aquifer’s water rights. Created by
the legislature, Bexar Metropolitan is run by a popularly elected board.5

SAWS
pumped 84 percent of its permitted allotment in 2005, stockpiling any
aquifer water surpluses in an underground storage system for future use. SAWS
spokesman Greg Flores credits the utility’s conservation program with
cutting per capita water consumption in its jurisdiction by 40 percent
since 1980. Yet San Antonio’s growth projections are so sobering that
it will be virtually impossible for SAWS to meet future water demand
without tapping more water from the aquifer or some other source. SAWS
prospects for new water include other aquifers, Canyon Lake, a
groundwater desalination project and a controversial pipeline from the
Lower Colorado River. SAWS estimates that the Colorado River will
supply 30 percent of its water by 2025.

Myron Hess, who
monitors Texas water systems for the National Wildlife Federation, is
skeptical of the Colorado River plan. Hess says SAWS is desperately
seeking a way for downriver rice farmers to conserve enough water from
the heavily stressed river to cover the big gulp that San Antonio
desires. Hess suspects that SAWS has been overly optimistic about how
much water rice farms will be able to conserve, an assumption that
could make or break the economic rationale for this big pipeline
project. “The reality is that SAWS would draw out far more than they
would save,” Hess says. SAWS has already spent $28 million on the study
stages of the Colorado River project.

Annalisa Pease,
director of the Greater Edwards Aquifer Alliance, credits SAWS with
having one of the best conservation programs in the state, but is
concerned that San Antonio is looking to get off the aquifer by sucking
up water from other counties. “It’s not about just looking for other
water, but what can we do in the way of conservation to negate that
need for other water or how can we find other water and do no harm,”
she says.

Compared to the relatively clean Edwards Aquifer,
most other water sources would impose considerably higher
water-treatment costs on the utility. To supplement its historical use
permits, SAWS already leases 26,000 acre-feet a year, according to
Flores. At the going market rate ($125 an acre-foot), these permits
would lease for more than $3.25 million, making SAWS a highly valued
customer among those wishing to market their rights.

The Water Suppliers

Fifteen
families control at least 11 percent of EAA-permitted water. Yet in
2005 just two of these families pumped more than half of their
permitted water supplies. This huge water surplus makes them the go-to
people for water-starved municipalities.

Many of these
families hold “irrigation permits” that earmark half of their permitted
water for agricultural uses only. They can sell or lease the other half
of these permits for more lucrative uses. If the 15 families sold half
of their permits at market value (between $5,500 and $6,000 an
acre-foot) they would make at least $167 million. Leasing the same
portion of their permits at the going rate of $125 per acre-foot would
bring in $3.9 million annually.

The EAA oversees many more
permit leases than sales. Would-be buyers say that permit prices have
become so expensive that they usually secure water through leases,
which have enjoyed relative price stability. For the most part, the
first families of Edwards Aquifer water have been holding on to their
permits. They appear to buy into the widespread view that the price of
water can only go up in Central Texas.

The First Families of EAA-Permitted Water

(Representing 11% of all Permitted Acre-Feet)

Family

2007 Permits
In Acre-feet

Estimated Value of
Transferable Permits*

Share of 2005
Permits Pumped

Briscoe

15,130

$41,608,364

31%

Verstuyft

7,085

$19,482,738

41%

Willoughby

5,395

$14,837,540

20%

Saathoff

3,687

$10,140,075

10%

Boehme

3,358

$9,234,500

18%

Woodley

3,326

$9,147,600

7%

Capt

3,234

$8,892,752

7%

Petty

3,025

$8,317,980

46%

Zachry

2,570

$7,067,500

15%

Windrow

2,414

$6,637,675

3%

Cole

2,388

$6,565,900

40%

Persyn

2,361

$6,492,197

20%

Gilleland

2,325

$6,394,253

32%

Clary

2,310

$6,351,345

66%

Dilworth

2,304

$6,336,000

64%

TOTALS:

62,919

$167,506,419

27%

*Based on selling estimated number of transferable irrigation permits at $5,500 per acre-foot.

Former
Texas Governor Dolph Briscoe is the largest individual owner of Edwards
Aquifer water rights. Alone and with his partner, Archie McFadin,
Briscoe controls the rights to 3 percent of all EAA-permitted water. In
2005 Briscoe pumped just 31 percent of his allotment. The estimated
transferable portions of Briscoe’s permits have a market value of more
than $41.6 million.

For years Briscoe has pushed to repeal a
state law that prohibits diversions of aquifer waters via pipelines. He
and other water-rich landowners, including the No. 2 ranked Verstuyft
family, have advocated constructing an expensive pipeline to transfer
water from Uvalde to San Antonio’s lucrative market. Since 1995,
Briscoe has spent between $185,000 and $235,000 on lobby contracts. The
University of Texas at San Antonio published a study in May 2006 that
concluded that such a pipeline would draw down water levels across the
aquifer, triggering more frequent critical-management periods. EAA
Board member Mario Cruz of Uvalde has led pipeline opposition, which he
characterizes as the leading threat to the aquifer.

The
family of Bruce Gilleland, who represents Uvalde County on the EAA
Board, holds title to 2,000 acre-feet of water with a potential market
value of more than $6 million. Gilleland’s wife, Linda, has advocated a
pipeline to suck aquifer water out of Uvalde County. Another EAA board
member Hunter Schuehle and his Frontier Ranches hold permits for 997
acre-feet. This is more than three times the amount of water rights
that Schuehle boasted in 2005. At that time he did not pump any of his
aquifer water.

The No. 3 individual permit holder is R.B.
Willoughby of Uvalde. He is president of edwardswater.com, a water
brokerage that markets surplus irrigation rights to municipalities or
other water-strained customers.

Laguna
Water, Ltd. opened business in 2001 to sell and lease Edwards water
rights to needy cities or industries. The company buys permits from
those who are not using all their rights and leases them to entities
with high demand. The renters then pay the fees to the Edwards Aquifer
Authority and hold the permits in their name, while the water broker
rakes in a cut. The companies listed above probably hold ownership of
more permits than are listed, but they are leasing these out for other
purposes. In 2004, Bexar Metropolitan Water District signed a 10-year
lease with Laguna Water for 2,500 acre-feet of rights at $317,000 a
year to cover a deficit in the utility’s water supply.6 Mike Albach, the sole employee of Laguna Water, is the former deputy general of Bexar Metropolitan.

Aqua
Capital Management, which began buying up rights in 2006, stands to
benefit off Edwards water, even though the company is headquartered in
Omaha, Nebraska. In 2006, this company also leased rights to Bexar
Metropolitan to help the district meet the needs of its customers
during an extensive drought.7

Edwardswater.com,
owned by large rights-holder R.B. Willoughby, reminds visitors to its
website that today “big brother is watching… and closely” to regulate
how much water is being pumped. The company encourages farmers and
irrigators to trade in some of their agrarian efforts in favor more
lucrative water-leasing ventures.

Mario Cruz, an Edwards
Aquifer Authority Board member representing Uvalde county, is “dead
set” against transferring water out of his community because Uvalde’s
economy is largely based on agriculture. “When you take water, which is
the most precious thing, and then you transfer it out of our district …
that will be the death of those communities because that’s the water
you’re going to use to grow crops.” If water brokers sell off to San
Antonio the water that has sustained local agricultural communities for
generation, then some Uvalde resident wonder what, if anything, will
drive their economy in the future.

Money Flows Like Water

Edwards Aquifer water stakeholders collectively invested $1,281,750 into Texas’ 2006 election cycle.
Presumably the $349,600 contributed by insurance giant United Services
Auto Association (USAA) has more to do with insurance policy than its
permit for 317 acre-feet of aquifer water.

The fortune of
the next largest contributors has a bigger water nexus. The family of
HB Zachry, Jr. poured $243,242 into Texas’ 2006 elections. This
family’s Zachry Construction is a lead contractor in the $184 billion
Trans Texas Corridor Project. Its Capitol Aggregates, Inc., which holds
title to 355 acre-feet of aquifer water, uses water to mix concrete.
The Zachry family controls another 2,570 acre-feet through its U-Bar
Ranch.

Another Texas Department of Transportation
contractor, John Weisman of Hunter Industries, controls 2,567 acre-feet
of water in the name of Flying W Properties. He gave state politicians
almost $80,000 in the 2006 cycle. Edwards water-rights king Dolph
Briscoe dropped $96,000 on Texas’ last elections.

Sen. Jeff
Wentworth (R-San Antonio) received the most aquifer-connected
contributions, receiving $26,500 from donors controlling 21,100
acre-feet of Edwards Water. Wentworth is the author of 2007 legislation
(SB 659) that would raise the EAA’s pumping cap from 450,000 acre-feet
to 549,000, at a time when the EAA’s cap is supposed to drop to 400,000
by next year. This is not the first time that Wentworth carried
water for Edwards permitees. In 2003, he spearheaded a failed bid to
repeal a state law prohibiting aquifer water from being piped out of
Uvalde County.

House
Natural Resources Committee Chair Robert Puente (D-San Antonio) also
has filed 2007 legislation to increase the EAA’s cap to 549,000
acre-feet (HB 1292). Puente received $2,500 from the Zachry family and
$2,000 from USAA.

Sen. Glenn Hegar (R-Katy) has a bill (SB
1341) that would raise the cap even higher to 579,000 acre-feet. Yet
Hegar’s bill would compel state agencies to participate in the
federally sponsored Recovery Implementation Program. This process seeks
to convene all interested parties to reach a consensus about how to
manage the aquifer to meet the requirements of the Endangered Species
Act. O Hegar says this framework would force the EAA to consider the
interests of his downstream constituents who have lacked a voice at the
agency. Hegar received $8,000 from aquifer-related donors, led by John
and Anne Weisman and followed by Houston-based permit holder Donald
Faust.

Dolph Briscoe’s largest contribution of $10,000 went
to Rep. Patrick Rose (D-Dripping Springs). Many of Rose’s constituents
live around the San Marcos Springs and have an interest in limiting
aquifer pumping to protect that resource. Earlier this year, Rose
requested that the Texas Water Development Board conduct a study on the
effects of Edwards pumping on the flows of the Comal and San Marcos
springs. The study found that a drought such as the one that occurred
in the 1950’s would dry up Comal Springs for more than two years.8

San
Antonio Water System currently is spending from $200,000 to $400,000 on
four lobby contracts. A current SAWS lobbyist—former Sen. Buster
Brown—promoted the failed 2003 Uvalde County pipeline scheme. SAWS says
it does not have an official position on the pipeline.

During
the 2003 and 2005 sessions at least eight EAA interests that
collectively control permits for more than 22,000 acre-feet paid
lobbyist Charles Bailey between $325,000 and $660,000. As a lobbyist,
Bailey helped craft the 1993 legislation creating the EAA—including the
provision that prohibits building a water pipeline from Uvalde to San
Antonio. “I was told that things have changed, that some of the rural
folks have saved water and so they want to be able to sell that extra
water,” Bailey told Livestock Weekly in 2007. “But they
couldn’t get it anywhere because there was this prohibition on a
pipeline.” Bailey said legislators who are no longer in office foiled
previous efforts to repeal the pipeline prohibition.10

Charles Bailey’s Aquifer-Linked Contracts, 2003-2005

Client

No. of
Contracts

Min. Value
of Contracts

Max. Value
of Contracts

'05 EAA
Permits
(acre-ft)

% Pumped
In 2005

Beth/Margaret/Ruth Bowman¹

7

$125,000

$260,000

385

20%

Bexar Metropolitan

2

$150,000

$250,000

30,551

84%

Reagan & Mary J. Houston

2

$25,000

$50,000

*0

NA

Bob Willoughby

1

$25,000

$50,000

1,419

20%

E.D. & Alex Kincaid²

2

$0

$20,000

957

47%

Albert Townsend

1

$0

$10,000

570

39%

John Weisman³

1

$0

$10,000

2,567

47%

Briscoe Ranches

1

$0

$10,000

16,741

31%

TOTAL:

17

$325,000

$660,000

22,254

*Had 20 acre-feet permitted in 2007 but none in 2005.
¹ Permits in the name “Callaghan Road, Ltd.”
² Permits in the name “E.B. Kincaid Estate.”
³ Permits in the name “Flying W Properties.”

With these obstacles out of the way, Briscoe Ranch interests are paying Bailey between $30,000 and $75,000 in 2007.11 Bailey also reports new contracts worth a total of up to $50,000 with
apparent EAA-permitees “McLean Bowman” and “John Weismon.” Finally,
Bailey has a contract for up to $25,000 with John McCall, the shampoo
magnate who contributed $1.2 million to Kinky Friedman’s failed 2006
gubernatorial bid. Although McCall lives on an Uvalde ranch, no EAA
permits were found in his name.

Edwards Aquifer Authority

When
the Texas Legislature created the Edwards Aquifer Authority in 1993,
the new agency’s chief marching orders were to: 1. Introduce a
permit-based system to regulate aquifer harvests; and 2. Create a
market that would convert aquifer water into a multi-million-dollar
commodity. While these goals were not completely contradictory,
successfully creating a lucrative, private water market could spawn a
class of private permit holders that will lobby to loosen regulatory
protections of the aquifer. Given that such a lobby already exists—and
almost certainly will build as water prices increase—the aquifer needs
an independent, transparent regulatory body strong enough to resist
these pressures.

Focal points for these lobby pressures
include the legislature, which already is being lobbied by Edwards
Aquifer permit interests, and the EAA itself. It is impossible to fully
gauge the influence that permit holders exercise over the agency’s
popularly elected 15-member board. Although candidates seeking
staggered, four-year terms on the EAA’s board file campaign-finance
reports with the agency, the EAA says it typically destroys these
records after just two years—halfway into a new board member’s term.12

Yet
the EAA lacked campaign-finance records even for most of its board
members who were elected in November 2006. In all, the EAA provided
complete campaign records for just three members: Carol Patterson
(elected in 2006), Enrique Valdivia (2006) and Hunter Schuehle
(2004). It provided partial records for five members. Finally it
provided no records for seven members, including five elected in 2006.13Those board members who responded to calls about incomplete records
said EAA staff had told them they did not need to file campaign records
because they had run unopposed and did not raise or spend any money.
Jennifer Wong Esparza, administrative assistant for the EAA, said EAA
employees do not advise candidates on what campaign records to file.14

During
her 2004 campaign, board member Bonnie Conner reported receiving a $750
contribution from a non-profit corporation: the San Antonio Parks
Foundation. A Texas Ethics Commission attorney said that any such
corporate contribution is a third-degree felony under Texas law. Asked
about the contribution, Conner initially said that she thought the
foundation (where she also serves as a board member) had reimbursed her
for a personal expenditure that she mistakenly reported as a campaign
donation. Conner subsequently said that her campaign may have given
$750 to the parks foundation and then erroneously reported the
transaction as if the money flowed in the opposite direction.

The
EAA campaign records that do exist for 2004 and 2006 reveal that EAA
board members obtain 11 percent of their campaign funds from EAA permit
holders. Board member Carol Patterson, who represents Bexar County,
took the most money from permit holders ($2,550), whereas Byron Miller,
who also represents Bexar County, received the greatest share of his
campaign funds from permit holders (39 percent).

EAA Contributions from Permit Holders

Board Member

Money From
Permit Holders

Total
Money
Raised

% from
Permit
Holders

Carol Patterson

$2,550

$37,765

7%

Susan K. Hughes

$2,062

$12,362

17%

Byron Miller

$1,500

$3,800

39%

Luana Buckner

$1,125

$3,375

33%

Mario Cruz

$460

$2,170

21%

Bonnie J. Conner

$0

$6,662

0%

Enrique Valdivia

$0

$4,511

0%

Hunter Schuehle

$0

$0

0%

TOTALS:

$7,697

$70,645

11%

EAA Permit-Holders Contributing To EAA Board Members

Amount
Donated

Contributor Name

City

Permit Held

Acre-ft
Permitted
in 2007

$3,000

USAA Employee PAC

San Antonio

United Services Automobile Assoc.

317

$1,000

Curtis C. Gunn, Jr.

San Antonio

Gee-Gee Ltd.

415

$1,000

Eugene Dawson

San Antonio

Self

6

$700

R.B.Willoughby

Uvalde

Self; Edwardswater.com

5,570

$562

H.B. Zachry, Jr.

San Antonio

Capitol Aggregates; U-Bar Ranch

2,925

$300

Pete Neutze

Uvalde

Self

498

$250

Wesley K. Winn

Uvalde

Self

2

$225

Craig D. Bush

Omaha, NE

Aqua Capital Management, LP

1,061

$160

Louis Capt

Uvalde

Capt Family; Self

3,234

$100

Scott Petty, Jr.

San Antonio

Petty Ranch; Self

3,025

$100

Joe M. Fohn

Hondo

Fohn's Farms

751

$100

Fohn Bendele

Hondo

Bendele Family; Self

149

$100

Linda Gilleland*

Uvalde

Gilleland Family; Bruce Gilleland

2,325

$50

Thomas Boehme

Castroville

Boehme Family; Self

3,358

$50

Joe. R. Straus, Jr.

San Antonio

Retama Partners (racetrack)

186

$7,697

TOTALS

23,822

R.B.
Willoughby, the president of Edwardswater.com, control the most water rights of any board contributor. He gave $300 to board member Carol Patterson, and $400 to EAA Vice-Chair Luana
Buckner, who chairs the permitting committee.

The EAA and its
board members have not done a good job of ensuring that board’s
campaign finances are disclosed and transparent. The records that do
exist reveal that permit holders supply 11 percent of the campaign
funds raised by board members. The EAA does not yet appear to be an
agency that has been completely captured by the industry it regulates.
But the risk of such a takeover exists.

Through
interviews with permit holders, researchers for this project learned
that the first permit database that the agency provided under the Texas
Public Information Act contained erroneous pumping data. Agency officials
also repeatedly expressed reluctance to provide basic information for
this report, citing their general manager’s concerns about the risk of
jeopardizing the agency’s legislative agenda. This is an agency that is
not accustomed to much public scrutiny and does not welcome it. As water
supplies fall and water prices rise, the EAA’s importance will increase
dramatically. The price of an EAA board seat will escalate and permit
holders will have the greatest incentive to cultivate EAA influence.
The Edwards Aquifer Authority—which was created as an antidote to the
rule of capture—needs to strengthen its democratic institutions to
escape being captured itself.